1. Incident: The company's revenue in 2023 reached 1,093 billion yuan, up 7.7% year on year; net profit to mother was 131.8 billion yuan, up 5.0% year on year; EBITDA reached 341.5 billion yuan, up 3.7% year on year.
2. Revenue side: Revenue and profit reached record highs, and the revenue structure was further optimized (1) Individual market performance was steady, and the customer structure was shifting from “dumbbell type” to “olive type”. The individual market achieved results of 490.199 billion yuan in 2023, an increase of 0.3% over the previous year, accounting for 56.8% of main revenue. Mobile customers were 991 million in 2023, a net increase of 15.99 million. ARPU was 49.3 yuan, up 0.6% year over year.
(2) The net increase in broadband customers in the home market is leading the industry, and the value of household customers is growing steadily. The household market achieved performance of 131,859 billion yuan in 2023, an increase of 13.1% over the previous year, accounting for 15.3% of main revenue. In 2023, the number of home broadband customers reached 264 million, a net increase of 20.12 million. The comprehensive ARPU for home customers reached 43.1 yuan, an increase of 2.4% over the previous year.
(3) The government and enterprise market is growing rapidly, and the digitalization of the 5G industry is empowering the industry to lead the industry. The household market achieved results of 192.120 billion yuan in 2023, an increase of 14.2% over the previous year, accounting for 22.2% of main revenue. The number of government and enterprise customers reached 28.37 million in 2023, a net increase of 5.17 million.
(4) Emerging markets have achieved large-scale operations, and revenue contributions have further increased. Emerging markets achieved results of 49.336 billion yuan in 2023, an increase of 28.2% over the previous year, accounting for 5.7% of main revenue. Among them, the international business and digital content business have achieved remarkable results.
3. Cost and expense side: Accelerate the optimization of the layout of the science and innovation system
The company achieved remarkable results in controlling costs and expenses. In 2023, the gross sales margin was 28.2%, an increase of 0.4 pct over the previous year, mainly due to a slowdown in employee remuneration growth; the net sales interest rate was 13.1%, down 0.3 pct from the previous year.
Actively control costs, and R&D investment continues to increase. The decline in the sales expense ratio is mainly due to increased channel operation support services and the expansion of small and medium-sized enterprises. It is expected that the scale of other corresponding sales expenses will be reduced. The decline in the management expense ratio is mainly due to a slowdown in employee remuneration growth and a reduction in administrative property expenses and costs related to maintenance support.
4. Asset side: The depreciation period for wireless equipment has been extended, freeing up profit margin. The depreciation period estimate for 5G communication equipment has changed. The company expects the impact on 2024 to reduce the depreciation amount by about 18 billion yuan.
Shareholder returns continued to increase. In addition to this year's total dividends of HK$4.83 per share, profits distributed in cash over the next three years will gradually increase to more than 75% of the profits due to shareholders in that year.
5. The capital expenditure structure has been adjusted in 2024, and the capital expenditure for 2023 will continue to be accelerated. The capital expenditure for 2023 is expected to be approximately $173 billion, down 4.0% from the previous year, and the share of capital expenditure to revenue is expected to fall below 20%.
Of this, computing power capital expenditure was 47.5 billion yuan, an increase of 21.5% over the previous year. In 2023, the total computing scale reached 8.0 EFLOPS, and the scale of intelligent computing power reached 10.1 EFLOPS, a significant increase of 206% over the previous year. The total calculation scale of the 2024 plan will reach 9 EFLOPS, and the intelligent calculation scale will exceed 17 EFLOPS, and investment in intelligent computing will continue to increase.
6. Investment advice:
We believe that along with the transformation of 5G and gigabit users, traditional businesses will develop steadily; the development of new quality productivity is expected to continue to drive the continuous growth of the digital transformation business. Considering the impact of the extended depreciation period of wireless equipment on depreciation and amortization, and adjust profit forecasts, it is estimated that 2024-2026 revenue will be adjusted from 107.98/11583/N/A 100 million yuan to 10785/11509/1226.7 billion yuan, respectively. Earnings per share will be adjusted from 6.62/7.02/N/A yuan to 6.53/6.91/7.32 yuan, corresponding to 2024 The closing price of 102.68 yuan/share on March 21, PE was 15.72/14.85/14.03 times, respectively, maintaining the “gain” rating.
7. Risk Warning:
Market competition increases risk; risk of industry policy changes; innovative business driving less than expected; systemic risk.